Phoenix-based CompTronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets:



Variable costs


Fixed costs


Management is considering relocating its manufacturing facilities to northern Mexicoto reduce costs. Variable costs are expected to average $21.60 per set; annual fixed costs are anticipated to be $2,380,800. (In the following requirements, ignore income taxes.)


1. Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in theUnited States.

2. Determine the break-even point in speaker sets if operations are shifted toMexico.

3. Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.

4. Determine the impact (increase, decrease, or no effect) of the following operating changes.

a. If variable costs remain constant, what must management do to fixed costs? By how much must fixed costs change?

b. Effect of an increase in fixed administrative costs on the unit contribution margin.

c. Effect of an increase in the unit contribution margin on net income.

d. Effect of a decrease in the number of units sold on the break-even point.